5 Rules Every Landlord Should Live By
I’m pretty confident that if you asked anyone who has ever owned a rental property you would get an overwhelming response that it’s not as lucrative or easy as they thought it would be. In fact, owning a rental property can be a major pain, and end up costing you a ton of money! I certainly don’t mean to be a “Debbie Downer”, and I know that if it’s done right it can be lucrative, but from an insurance agent’s perspective, I don’t see a lot of people doing it right. So you’re probably thinking, “Well Chris, you are an insurance agent. What do you know about real estate or rental properties? Why should I take advice from you?” I’m not a real estate agent, and I don’t own a rental property. However, several of my friends/family/clients/co-workers own rentals, and because I insure a bunch of their properties, I’ve had a first hand account of the process, and I’ve learned what to do, and what not to do.
1.) Do your due diligence on the rental propertyThis is undoubtedly the biggest mistake I see landlords make. They are in such a rush to make money, they don’t pay enough attention to the property. I get it–you want to buy the cheapest property possible so you can turn the biggest profit. The problem with that is, the property is cheap for a reason. It has problems–lots of problems.
Many people buy properties in low income areas, with hopes of re-painting the walls every 5 years and making some rent money. The problem is, that’s the exact type of property that insurance companies don’t want to take a risk on.Be very careful with the “as-is” property too. Unless you have money to burn, stay away. You are almost always going to spend more money than you think. Most “as-is” properties are either forecloser’s or properties that have been vacant/abandoned. If you don’t know what to look for in a rental, hire a trusted 3rd party home inspector and make sure everything, and I mean everything checks out. Don’t leave any stone unturned. Everything must be up to code before you have a tenant in the house. Period. If it’s not, make it up to code. In particular, you need to make sure the wiring, plumbing, heating, and roof are all “problem-free”, and that they’ve been upgraded or updated within the past 10 years. I’ve seen more problems with those three things than anything else, and you are putting yourself (lawsuit), and your tenant at risk if they aren’t in good working condition. And whatever you do, make sure there are no mold problems. Don’t just assume there isn’t. You need to test the house, and document it. Mold can kill–literally. Of course, you may want to walk away from a property because it might be cost-prohibitive to bring everything up to code, and that’s something that only you can decide, but before you buy a rental property and put get a tenant, do your due diligence on the home. It’s worth the time and effort.